IRS Announces 401(k) Contribution Limits for 2023

The Internal Revenue Service announced Friday cost of living adjustments for contributions to retirement accounts.

The contribution limit for employees who participate in 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan has increased to $22,500, up from $20,500. The limit on annual contributions to an IRA increased to $6,500, up from $6,000.

The IRS guidance regarding all of the cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2023 can be found in Notice 2022-55.

Catch-Up Contributions

The IRA catch-up contribution limit for individuals 50 and older is not subject to an annual cost-of-living adjustment and remains $1,000, the IRS said.

The catch-up contribution limit for employees 50 and older who participate in 401(k)s, 403(b)s, most 457 plans and the federal government’s Thrift Savings Plan is increased to $7,500, up from $6,500.

“Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $30,000, starting in 2023,” the IRS said.

The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000.

IRAs, Roth IRAs, Saver’s Credit

Income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2023, the IRS explained.

“If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income,” the IRS explained.

If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply, the IRS said.

The phase-out ranges for 2023, as explained by the IRS, are as follows:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $73,000 and $83,000, up from between $68,000 and $78,000.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $116,000 and $136,000, up from between $109,000 and $129,000.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

“The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000,” the IRS explained.

For married couples filing jointly, “the income phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000,” the IRS said.

The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000, the IRS said.

The amount individuals can contribute to their SIMPLE retirement accounts is increased to $15,500, up from $14,000, according to the agency.